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Thursday April 26, 7:00 pm ET
Amy Reeves
No question about it: Solar power is energy's latest \"gold rush.\" New government subsidies in several countries have brought many new start-ups onto the market, where their stocks have exploded.
Yet as we saw with the dot-com bubble -- and more recently with ethanol -- gold rushes carry risks. Some fly-by-night operations pop up just to take advantage of the hype.
Though he heads one of the newer outfits, JA Solar (NasdaqGM:JASO - News) Chief Executive Samuel Yang says his company is here to stay.
\"We have the right philosophy,\" he said. \"We're not just jumping into it to make money. We're working for the earth.\"
Not that JA Solar isn't making money in the meantime. Founded in August 2005, it only started selling its solar cells last year but made 37 cents a share doing it. This year, analysts expect sales growth near 90% with roughly 30% profit growth.
Though it's going up against more established players like Suntech Power (NYSE:STP - News), analysts say JA Solar has some advantages in the market. Its parent company is JingLong Group, China's largest maker of silicon wafers. Since the solar boom started, there's been a frantic scramble for these wafers, which are used to make the photovoltaic cells that make up solar panels.
JA Solar's close relationship with JingLong has helped it get wafers on favorable terms, which it has also filled out with a deal from Hemlock Semiconductor, a joint venture of Dow Corning and two Japanese firms. It has procured all of the wafers it needs for this year and 80% of its needs for next year.
\"We think getting a reliable source of silicon from an incumbent player is critical in (determining) which companies are able to build capacity and take market share in the industry,\" said analyst Stuart Bush of RBC Capital Markets, an underwriter for the firm's February initial public offering.
The silicon crunch has been especially hard on a sector that's always trying to cut costs because the larger competitor for all solar players is the traditional fossil-fuel industry. Currently the field relies on government subsidies to compete on cost, but the ultimate plan is independence.
Still, Yang says, he's not willing to sacrifice quality. Other cell makers use the thinnest wafers they can get away with to save money on silicon, he says. But these makes the cells break more easily. Yang claims that in fact many solar modules come off the ship with cells already broken, but customers don't realize this.
\"Our warranty is 25 years,\" he said. \"If the price is better, but it lasts only 10 years, then the price is really expensive.\"
The quality pitch has landed JA Solar some big customers.
On the solar-power supply chain, JA Solar sits smack in the middle. Companies like JingLong make the silicon and cut it into wafers, which JA Solar makes into cells. It sells these to companies that assemble and install the modules, including PowerLight, now a unit of SunPower (NasdaqGM:SPWR - News). Another customer is Crown Renewable Energy.
Not all solar companies have JA Solar's singular focus. Suntech makes both cells and modules, while Trina Solar (NYSE:TSL - News) is trying to get the whole sequence under one roof.
Yang, however, thinks the cell-only strategy is appropriate, since that's where the managers' expertise lies. Before JA Solar's founding, Yang worked for a Chinese cell distributor and also worked two years in marketing at Suntech. Chief Technology Officer Ximing Dai used to be an academic and engineer specializing in photovoltaics in Australia.
Analyst Pierre Maccagno of Needham Research (another underwriter) says that one advantage of specializing in cells is that it has lower selling, general and administrative expenses than some other parts of the supply chain. On the other hand, he says this limits the company's marketing abilities, since it doesn't deal directly with end customers.
Bush says he doesn't expect the firm to move into module making, since that's a low-value-added business. He does think it may expand in the other direction, however -- into making the much-needed silicon wafers.
For the foreseeable future, though, making high-quality cells in the low-rent location of China is enough to compete on the global market, Bush says.
\"Right now, you're effectively playing the spread in the market price for silicon and the market price for cells,\" he said. \"We believe that long term, as silicon becomes less of a percentage of costs, their lower manufacturing costs vs. producers in Europe and America will be an advantage.\"
Still, the gold rush can be tricky to negotiate. After JA Solar's stock shot up 45% in just three days this month, CIBC World Markets analyst Jeff Osborne hit it with a downgrade, saying such a valuation for what was basically a commodity player wasn't justified. Osborne was not available for comment, but he kept his rating at \"sector perform.\"
FROM：http://biz.yahoo.com/ibd/070426/newamer.html?.v=1 |
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发表于 2007-4-30 09:30:01